Of money. Do you think pension advances should be regulated like those products for people who really need the money . Some sort of Interest Rate cap . I mean, are we making a mistake by outlawing these as opposed to just making them behave like moral human beings . That would be a good start. I think that the, first of all, you have to distinguish between the payday lenders and the other products, prid tory products out there. What is unique about these pension advance companies, and it was a great surprise to us was that they are much smaller in size. Many of the other predatory lenders are now, you know, publiclyheld companies, and it these were pretty much dimly capitalized corporations that had no skin in the game. What we found out with each of these entities was that they only loaned out what they were able to get in from investors. So the individuals who were running the show. It was like a bookie, just take being the big. Just taking the big. I dont know how i knew that word. I just want to say for the record. I want to put that on the record. I dont know where that came from. But i come from boston, so i know exactly what you mean. And i dont. I come from maine. And i think that the other thing that is significant is that most predatory loans we see out there are in the 5,000 to 10,000 range. As i think mr. Lord said and we found in our reports, we were seeing averages of 45,000 to 50,000 and upwards over 100,000, which is a much bigger sum. Look, we understand that individuals run into difficult times financially, like the doctor was testifying. There are certainly each, in my case, in the military, each of the branches of the military have relief funds to help people in cases of emergency. Theres also the possibility to use the guaranteed stream of income in order to secure a loan from a more responsible and regulated source. So you could go to a Credit Organization or a savings and loan to be able to take up a loan and then secure it. The key here, though, is that you are controlling your funding. And that is not the cation with these companies. You literally lose control over your pension, over that time. And i thought the doctor was absolutely correct. We have the same situation, that if in fact you tried any way to get yourself out of the transaction, you were penalized with a twoyear addition. That is two years, in their case, of almost 3,000. So youre looking at a 25,000 penalty. Its outrageous, unconscionable. It is a shark practice that really cannot be tolerated. So i dont know that regulating that makes a great deal of sense. I think that providing other alternative products are important. Last thing i wanted to add on this, senator is the fact that were dealing here with an internet product now. Right. Its very different than when we started this in 2003. And you saying that they are going from arkansas to texas, half the time you have no idea where this company is located. Just an ip address. Exactly. Thank you very much. Senator tillis. Thank you, madam chair. I made a personal note to go on the internet and look up what a big, is. Oh, come on. I dont believe you. Dr. Kroot, am i pronouncing that properly . Yes, you are, senator. First of all, thank you for your service in the navy, and thank you for your continued service for our veterans. I wanted to get to the you were required to take out a Life Insurance policy, i think for 180,000. This is after youve agreed to pay about 230,000 back for 91,000 loan. What is the nature of the requirement that you have now in terms of keeping that Life Insurance policy current . I mean, are they paying it at this point . And you have to keep it . I need to understand a little bit about that ongoing obligation. We paid for this, and it was paid up. And when we it was a term Life Insurance in the term ends in october. We were unable to stop paying it until the end of the term, because we needed permission from structured to stop paying it. Thank you. And im sorry for what you went through. Ms. Wolf, i have a question for you. The operation in arkansas, it sounds like this, i think its fair to call him a thief. He would originate some of these loans and sell them . Im trying to get a sense of his Business Operation. It sounds like i would do a loan for dr. Kroot, identify people who would buy the product that he has sold, did he continue to service these loans . Did he have a Business Operation . Or did he wash his hands of it after he transferred it or distributed it . Originally, well, pretty much he washed his hands of it. What would happen is the company would, through an agent say, in p florida would find someone who wanted to sell their pension for a lump sum. So this person in florida, usually a military veteran put the amount that they were looking to sell it for and the amount of money they were looking and the amount of money they got each month for their pension. Voyager would package these and put a Purchase Price on them, unbeknownst to the pensioner, and through another network of agents would find a buyer who was willing to pay that amount of money for, say, 1,000 a month for six years coming in. But voyager would facilitate all the paperwork between the parties and kind of stay out of it. They would facilitate everything. But who, i was trying to get a sense of whos doing the servicing of the loan . Because theres still that process of, i guess, processing the pension paints, providing some disbursement back to the person who provided the loan. So i was trying to get a better understanding of the Business Enterprise that existing for the life of the loan. Voyager would set up an escrow account for the lumpsum payment and the pensioner set up an escrow account for a certain a time to direct the pension. So there was never actually a loan. They would have the pensioner direct that money into the escrow account for a certain amount of time. And thats where the issue came from, because the pensioners would then turn around and redirect the money back to themselves or have to file for bankruptcy or it get caught up in the bankruptcy. So there was never, the loan to the pensioner would be kiss tribted at the very beginning. Okay. Mr. Rossman or mr. Lord, or anyone else who may want to contribute, the law that was passed by vermont, is that a best practice law . Is that something that all states should consider . Or is there a best practice baseline out there that as we discuss what we may do at the federal level that we should be encouraging our respective states to take up . Unfortunately, i dont now enough about the vermont, the specifics to comment on other than they do have a law that pertains to this issue. The problem, the vermont law is a good law. Theres no doubt about that. The problem is that because of the situation of the internet, there, it stops at the state line. States can only do so much to protect their citizens from people coming from outside of the jurisdiction. And i think that the proposal of having a federal system that would guarantee you knuniform i across the country would be a good one because theres always going to be a jurisdiction to hide out, so to speak, in order to market their bad wares. Thank you for the work youre doing, and dr. Kroot, thank you for your service to our country. Thank you. Senator warren . Thank chair collins. I want to thank you for holding this hearing today and thank you to all the witnesses for coming. We really appreciate you coming and telling the story. I know its hard to do that. But its very important that we understand whats happening here. I just want to see if i can pull this together so we all kind of get it in one place. So define benefit pensions, the steady guaranteed income stream throughout retirement, we know these pensions are disappearing, and the americans who still have them know they are lucky to have these pensions, but now theres this interconnected industry thats targeted to getting their hands on the pensions. So these pension Scam Companies turn a profit by offering retirees cash in exchange for a fixed amount of the buyers future pension, as you testified to, plus, of course, interest and fees. And according to a 2014 report from the nonpartisan Government Accountability office, and also from senator collins, these loans can have pretty shocking fine print, for example effective Interest Rates over 100 . And, to make sure that they get paid no matter what, these Companies Require the retirees, often, to buy a separate Life Insurance policy to cover the loan if the refiery dies and the pension stops. So it is a great deal fort conditions running the pension scam. No risk and 100 plus Interest Rates on this. So i just want to pull a couple of the pieces apart. Mr. Rossman, youve seen the damage that these predatory pension scams do first hand. And i want to ask about some of the details. Whos the typical victim of this kind of scam . The typical victim of the scam, youre going to have someone who has a guaranteed stream of income. And who does that tend to be . Youre including in here, youre going to have retired military personnel, disabled military personnel, state, municipal and federal Government Employees who are covered. And then in our case, we are, those individuals covered by erisa does have protections. Military, teachers, firefighters. Exactly. All right. Now lots of states have Consumer Protection laws prohibiting loans with the high interest rati rat rates, usury laws. So how can this be legal . In our case, every single page of the contract was stamped at the bottom of the page that says this is not a loan. After having done this for 20 years, if it quacks like a loan and waddles like a loan, its probably a loan. But they went to Great Lengths in order to avoid having typical contract loan language and discounting that it was a loan. One thing that was interesting and we caught them on was there were a a number of cases early where people tried to discharge in bankruptcy, and we were able to get the bankruptcy records with the same Company Coming in saying, no, no, no, its not a loan. Its an assignment. So then we go to california and they say its not a loan, its not a signment, now weve got them. They say its not a loan. You want to avoid the usury statutes. Truth and lending. And they want to avoid having it discharged in bankruptcy. So they dont want to make the disclosures. They dont want to comply with the laws around loans. So they go to the other side and they say theyre not loans, theyre assignments. So let me ask that question then. If these are assignments, are they then legal . In some cases they are are not. Thats where the cloudiness comes. If it is military pay for a retired benefit, for enlisted personnel, you are protected by the military pay act. But if youre unfortunately like the doctor, a commissioned officer, you are not protected. All disabled veterans are covered under the v. A. By antisignbility. Virtually every state and federal employee statute includes provisions for antiassignment and erisa in many cases prohibit it. So, for some people, it is the case that it doesnt matter whether its a loan or an assignment, its not legal either way. Thats right. Youve got them in the horns of a dilemma. For some, assignment is still legal, and this is just a place where the law has not given full protection. Okay. So it sounds like were starting to get some action on this. Five years ago, Congress Passed dodd frank to try to prevent companies from cheating consumers, and as someone mentioned in their testimony, the cfpb has now partnered with the new York Department of Financial Services to file two suits against two of the largest pension Scam Companies for using these deceptive marketing practices to dupe retirees into borrowing from their pensions, obviously a good first step, but we need to do more. There is no excuse for this. Its time to put a stop to these scams. Thank you, madam chair. Thank you, senator kaine . This is sadly eye opening and especially the spectre of ads targeting veterans with flag waving and patriotic themes and pictures makes you sick to your stomach. Im really discouraged at this. A couple of questions i was going to ask. Maybe ill start with ms. Wolf. So enter gamber. He had a previous history before getting into this pension advance area. He had permanently lost his license as assurance broker for grossly misleading his customers, according to a Committee Briefing for this. So i guess he was in a field where there was a regulated environment, and he had engaged in activities that caused him to have his license pulled. But i guess its an indication that this kind of falls in the cracks, these pension advance, because he could go from a regulated area losing his license to setting Something Like this up without a license. Right. And is that just the quirks of all the different state laws and how this kind of Financial Product is treated or maybe more often not treated under state law . I would think so, but also mr. Gamber seems to not really have a conscience and not really care what the laws are. His license was revoked in 2009 from the arkansas insurance department. He was not licensed under our act. But thats not to say that he wasnt selling securities. And so because it was a security under arkansas law, we were able to take action. But i do want to point out, his license was revoked in 2009. He formed bfg in 2010. We took abs against him in 2013 and 2014, and now hes formed a new company. So hes definitely finding ways to skirt the law and finding those gray areas to exploit. The gao report is interesting, because i think your study indicated with this bubble chart that the pension transaction are concentrated in these two large groups. One was mr. Gamber, and we talked about him. And future Payments Group is run by steven kohn, which led to him being convicted of federal criminal counterfeiting. So you have the two main groups, one run by someone whos lost his license because of misrengss to insurance client, and the other is being run by someone who had been convicted of federal criminal counterfeiting, and those are the two main groups doing this in the country right now. Unfortunately, you have several unsavory characters operating in these business lines. From a consumer perspective, again, its very difficult to know who youre dealing with, because thats not revealed on the company website. So, from a disclosure perspective, thats why we raise that as an issue in our report. But, again, from a regulatory problem, if youve got folks whove been in different sort of financial capacities, and one has been, you know, are suspended, his license because of insurance challenges. And the others been convicted of federal criminal counterfeiting, but nonetheless, three can do this kind of a business, this suggests that theres sort of like a gap in which theyre trying to put their work in a lessregulated area. Yeah. Its amazing that we would have less regulation for these kinds of pension transactions than we would for insurance. I mean, insurance is really important. Pensions are really important, too. That would be a gap and something that is notable. I want to take the kroots testimony, and i really appreciate you coming and sharing the experience, and i often find these hearings are really valuable, because people are willing, thank god, to come share whats been a painful experience, and we can learn from it. Thank you for being willing to do that. But they talked about, and im going to ask the other witnesses to help me with this question. They talked about the challenge think were dealing with. Medical bills with a daughter, housing expenses. These are the kinds of things that people run into every day. There are many alternatives better than these kinds of loans. So these generic advisers to seniors or veterans that are confronted with financial needs that they described. Got some real legitimate concerns. You see these kind of ads in the paper about maybe, you know, take advantage of this 800 number or get on this website to get help. What are the better alternatives. Were having hearings like this. What other alternatives that folks should explore. Were not talking about a particular circumstance. And mrs. Kroot, you want to jump in first. So please. Yes. One of the things that happened with us and structured, we took this money out to pay the irs. And at the end, when we, the loan was concluded, we were given a list of who we could pay and who we couldnt. The irs was not on it. So we paid those other ones, and we had to finally call the irs, which worked with us on a payment plan for the 100,000. Mmhm. And i would piwish to put on the record, the irs was extremely cooperative in coming up with a payment plan that was not a burden to us. Senator, one of the things thats important, and we were talking before about why they were treated as loans or assignments. One of the pitches that these companies will make is that because its not a loan, you dont have to worry about your credit score. Many of the people in dire financial straits are because their Credit Scores have deteriorated to the point that they cant have access to other prime sources of lending. And they say since this is not a loan you dont have to worry about your credit score. You have the United States government paying you off and insurance as well. So youre dealing with a community that has difficulties because of their Credit Scores and are looking for options. If youre dealing with credit cards, for example, work being with the Credit Card Companies or dealing with a nonprofit. Credit counseling. To help you work out a plan to be able to pay off is certainly better. You do have this guaranteed stream of income, although you dont want to lose control of it, you still can use it as collateral as part of a good plan to pay off your dits to secure funding but maintaining control and not turning it over to someone else. And, the final area, at least in the military is that the jag corps is upset because there are systems in the military, air force relief, army relief to help with the